This Management Discussion and Analysis report has been prepared in compliance with the requirements of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and contains expectations and projections about the strategy for growth, product development, market position, expenditures and financial results. Certain Statements in the Management Discussion and analysis report are forward looking statements which involve, a number of risks and uncertainties that could differ actual results, performance or achievements with such forward looking statements on the basis of any subsequent development, information or events for which the Company do not bear any responsibility.
The past more than two years have been turbulent for global economies in ways many would not have imagined. The pandemic has created an economic and humanitarian havoc across all nations. When things started normalising, the world economy has been challenged again by the fallout of Russia-Ukraine conflict. These unforeseen events have had far-reaching consequences in the form of slowing growth, high commodity prices, rising interest rates and volatile financial markets. It threatens to undermine the economic recovery process that has been hesitantly making its way through the covid pandemic.
Though the Indian economy has waded through these challenges rather well with policy support from the government and the Reserve Bank, there is no denying that the uncertain global environment is posing a strong headwind to domestic growth through various channels. Indias economic prospects are also challenged by these geo-political developments through disrupted supply chains and escalated prices of the key industrial inputs that resulted in elevated inflation and financial markets turbulence.
The silver lining is that there is a gradual improvement in domestic demand indicators and some easing of inflation is showing. It is heartening that India is the only economy among the top ten leading economies in the world which has shown consistent improvement in economic performance during the last four years. Indias robustness amidst the testing times of COVID-19 remains intact. The Indian Economy improved from 6th position in 2019 to 4th position in 2020, 3rd in 2021 and 2nd in 2022 among the top ten leading economies.
It is only pertinent though that the consumer sentiment recovers going forward to ensure a sustained rise in consumption demand. In FY22, despite the global and domestic turbulence, India Inc. managed to record healthy growth in sales and profits, but FY23 has further challenges in store. A jump in total expenditure due to high raw material and employee costs is a pain point already, and the slowing global growth, a depreciating rupee and rising interest rates could create further roadblocks.
A tentative recovery in 2021 has been followed by increasingly gloomy developments in 2022 as risks began to materialize. Global output contracted in the second quarter of this year, owing to downturns in China and Russia, while US consumer spending undershot expectations. Several shocks have hit a world economy already weakened by the pandemic: higher-than-expected inflation worldwide—especially in the United States and major European economies—triggering tighter financial conditions; a worse-than-anticipated slowdown in China, reflecting COVID- 19 outbreaks and lockdowns; and further negative spillovers from the war in Ukraine.
The baseline forecast is for growth to slow from 6.1 percent last year to 3.2 percent in 2022, 0.4 percentage point lower than in the April 2022 World Economic Outlook. Lower growth earlier this year, reduced household purchasing power, and tighter monetary policy drove a downward revision of 1.4 percentage points in the United States. In China, further lockdowns and the deepening real estate crisis have led growth to be revised down by 1.1 percentage points, with major global spillovers. And in Europe, significant downgrades reflect spillovers from the war in Ukraine and tighter monetary policy. Global inflation has been revised up due to food and energy prices as well as lingering supply- demand imbalances, and is anticipated to reach 6.6 percent in advanced economies and 9.5 percent in emerging market and developing economies this year—upward revisions of 0.9 and 0.8 percentage point, respectively. In 2023, disinflationary monetary policy is expected to bite, with global output growing by just 2.9 percent.
The risks to the outlook are overwhelmingly tilted to the downside. The war in Ukraine could lead to a sudden stop of European gas imports from Russia; inflation could be harder to bring down than anticipated either if labor markets are tighter than expected or inflation expectations unanchor; tighter global financial conditions could induce debt distress in emerging market and developing economies; renewed COVID-19 outbreaks and lockdowns as well as a further escalation of the property sector crisis might further suppress Chinese growth; and geopolitical fragmentation could impede global trade and cooperation. A plausible alternative scenario in which risks materialize, inflation rises further, and global growth declines to about 2.6 percent and 2.0 percent in 2022 and 2023, respectively, would put growth in the bottom 10 percent of outcomes since 1970.
With increasing prices continuing to squeeze living standards worldwide, taming inflation should be the first priority for policymakers. Tighter monetary policy will inevitably have real economic costs, but delay will only exacerbate them. Targeted fiscal support can help cushion the impact on the most vulnerable, but with government budgets stretched by the pandemic and the need for a disinflationary overall macroeconomic policy stance, such policies will need to be offset by increased taxes or lower government spending. Tighter monetary conditions will also affect financial stability, requiring judicious use of macroprudential tools and making reforms to debt resolution frameworks all the more necessary. Policies to address specific impacts on energy and food prices should focus on those most affected without distorting prices. And as the pandemic continues, vaccination rates must rise to guard against future variants. Finally, mitigating climate change continues to require urgent multilateral action to limit emissions and raise investments to hasten the green transition.
Indias Economic Performance:
Indian economy stands out yet, compared to most other major economies, India is well placed, with inflation largely under control and demand rising sharply in a post-Covid rebound. Further, our financial sector is now healthier as corporates have largely delivered. Thus, smart policymaking over the past few years—including welcome fiscal prudence by the Finance Minister Mrs. Nirmala Sitharaman during the pandemic—and huge efforts, plus adaptability, by India Inc. have helped set the stage for sustained strong growth.
According to the recent United Nations World Economic Situation and Prospects (WESP) 2022 report, Indias economic recovery is on a ‘solid path. The Reserve Bank of India (RBI) has also pegged the economic growth rate at 7.8 per cent for 2022- 23, thus adding impetus to the buzz on the economic recovery. This is a far cry from the time the country and the world came to a standstill with the onset of the COVID-19 pandemic, which took deadlier proportions in 2021.
INDUSTRY STRUCTURE AND DEVELOPMENT
"There were already signs of an impending slowdown in the economy, which have been sharply accentuated by the COVID-19 pandemic induced lockdown. The spread of COVID-19 pandemic has severely hit global as well as domestic growth", however, the Financial year 2021 -22 has been better and the Country is recovering from the Covid 19.
INDIAN AGRICULTURE INDUSTRY ANALYSIS
Agriculture is the primary source of livelihood for about 58% of Indias population. Consumer spending in India will return to growth in 2021 post the pandemic-led contraction, expanding by as much as 6.6%. The Indian food industry is poised for huge growth, increasing its contribution to world food trade every year due to its immense potential for value addition, particularly within the food processing industry. The Indian food processing industry accounts for 32% of the countrys total food market, one of the largest industries in India and is ranked fifth in terms of production, consumption, export and expected growth.
According to Inc42, the Indian agricultural sector is predicted to increase to US$ 24 billion by 2025. Indian food and grocery market is the worlds sixth largest, with retail contributing 70% of the sales. As per the second advance estimates, foodgrain production in India is estimated to be 316.06 MT in FY 2021-22.
In terms of exports, the sector has seen good growth in the past year. In FY22 (until December 2021) -
• Exports of marine products stood at US$ 6.12 billion.
• Exports of rice (Basmati and Non-Basmati) stood at US$ 6.12 billion.
• Buffalo meat exports stood at US$ 2.51 billion.
• Sugar exports stood at US$ 2.78 billion.
• Tea exports stood at US$ 570.15 million.
• Coffee exports stood at US$ 719.95 million.
METALS AND STEELS:
India holds a fair advantage in production and conversion costs in steel and alumina. Its strategic location enables export opportunities to develop as well as fast-developing Asian markets. As of FY22, the number of reporting mines in India were estimated at 1,425, of which reporting mines for metallic minerals were estimated at 525 and nonmetallic minerals at 720.
Rise in infrastructure development and automotive production are driving growth. Power and cement industries are also aiding growth for the sector. Demand for iron and steel is set to continue given the strong growth expectations for the residential and commercial building industry.
In FY 2021-22, coal production in India stood at 777.31 MT (provisional) with a growth of 8.55%. In FY22, mineral production is estimated at Rs.190,392 crore (US$ 24.95 billion). India ranks fourth globally in terms of iron ore production. Production of iron ore in FY21 stood at 204.48 million tonnes. From April 2021- January 2022, iron ore production in India stood at 204 million tonnes (MT). In FY20, India had a total number of 878 steel plants producing crude steel. Indias crude steel production stood at 103 MT in FY21. The steel production in India is projected to increase by 18% to reach 120 million tonnes (MT) by FY22. In Q3 FY22, production of hot metal, crude steel and saleable steel by SAIL stood at 1.55 MT, 1.44 MT and 1.46 MT, respectively. Combined Aluminium production (primary and secondary) in India stood at 4.1 MT per annuam in FY21 becoming the 2nd largest in the world. Aluminium production stood at 3,285,186 tonnes between April 2020 and January 2021. India is the worlds second-largest coal producer as of 2021.
Some of the investments/ developments in the Metals & Mining sector in the recent past are as follows:
• From April 2000-March 2022, FDI inflows in the metallurgical industry stood at (US$ 17.02 billion), followed by the mining (US$ 3.24 billion), diamond & gold ornaments (US$ 1.21 billion) and coal production (US$ 27.73 million) industries.
• GVA from mining and quarrying stood at US$ 43.3 billion in FY22, as per the advance estimates
• In FY23, Vedantas aluminium division will focus on backward integration and will put two of its mines in Odisha into production.
• NMDCs cumulative iron ore production (until May 2022) stood at 6.35 MT as compared to 5.91 MT (until May 2021)
• In FY 2021 -22 (until December 2021), Indias iron and steel export was valued at US$ 1 7.62 billion. During FYI6-21, Indias export of iron and steel grew at a CAGR of 17.51 %.
• In FY 2021-22 (until December 2021), iron ore exports stood at US$ 2.47 billion compared with US$ 4.9 billion in FY 2020-21.
• Iron and steel imports stood at US$ 17.3 billion in FY22 as compared to US$ 12.04 billion in FY2I.
• In May 2022, the combined index of eight core industries stood at 148.1 driven by production of cement, coal, fertilizers and electricity industries.
• Traffic handled at major ports stood at 64,960 thousand tonnes in April 2022.
• Indias total installed electricity generation capacity stood at 399.49 GW in FY 2022. Installed capacity has increased steadily over the years, posting a CAGR of 6.08% % in FY16-22
• In November 2021, JSW Steel announced that the company registered a 6% YoY surge in crude steel production at 1.42 million tonnes in October 2021.
• In November 2021, AMNS India announced that it is planning to manufacture specialty steel under the production-linked incentive (PLI) scheme.
• In September 2021, National Mineral Development Corporation Ltd. (NMDC) R&D Centre collaborated with CSIR-IMMT (Institute of Minerals and Materials Technology) to pursue combined research projects on iron ore mining technologies.
• Vedanta Limited is planning a US$ 20 billion investment across its operations, including increase silver production and steel capacity.
• In June 2021, Mr. T.V. Narendran, the CII President and Managing Director of Tata Steel, stated that steel firms have firmed up plans to invest ~Rs. 60,000 crore (US$ 8 billion) over the next three years in this sector.
• In May 2021, Vedanta Ltd. announced its plan to invest Rs.10,000 crore (US$ 1.34 billion) in setting up an aluminium park in Odisha to facilitate companies that use metal to set up their manufacturing units in the facility.
• In May 2021, ArcelorMittal Nippon Steel (AMNS) signed a contract with Total (a France-based energy company) for supply of up to 500,000 tons of liquefied natural gas (LNG) per year until 2026.
• In March 2021, Coal India Ltd. (CIL) approved 32 new coal mining projects, of which 24 are expansion of the existing projects and the remaining are greenfield. Estimated cost of the project is Rs. 47,000 crore (US$ 6.47 billion).
• In February 2021, ArcelorMittal-Nippon Steel India, in agreement with the Odisha government, has planned to set up an integrated steel plant (with 12 MT capacity) in the states Kendrapada district for Rs. 50,000 crore (US$ 6.89 billion)
• In February 2021, two new iron ore mines were inaugurated in Odisha, with a production capacity of 15 lakh tonnes per month and ~275 million tonnes of consolidated iron ore reserves. These mines will bring in ~Rs. 5000 crore (US$ 679.28 million) in annual revenue for the state and employment opportunities for locals.
Our Company is in the Line of Business of Import/ Export or Trading of following products and also deals in Engineering / Technical Consultancy or Indenting / Commission or Business Consulting Services of:
1. Metal Scrap - The Company offers a wide range of scrap metals viz. HMS (Heavy Melting Scrap), aluminum scrap, stainless steel scrap, copper scrap, brass scrap, etc. The company also deals in ferrous Scrap, non-ferrous Scrap and reusable items. It procures metal scrap originating from USA, West African and European countries, and sells these products in the domestic market all over India.
2. Petrochemicals - The Company also operates in the trading, wholesaling, distribution and indenting business of base oil variants to refineries along with supply of petrochemicals to industries. The petroleum products traded / distributed by the Company are Group I, II and III variants for
automobiles lubricants and different industrial purposes, Granular & Formed Sulphur used in phosphate based industrial and consumer industry sectors and Aromatics - Benzene, Toluene.
3. Spices & Dry Fruits - The Company Locally trade in Dry Fruits and spices in domestic local market.
4. Non-Basmati Rice - The Company is in Trading of all types of non-basmati rice locally. Procurement is from domestic market and sale is also in domestic market.
We have developed a sustainability mission for our company which can be briefed in three words (reduce-reuse- recycle).
The turnover during the year 2021-22 has touched of Rs. 12,366.79/- (INR in Lakhs) approx. excluding the other income.
The Company has already set up a good marketing team as it is evident from turnover.
The Company has an internal control system, commensurate with the size of its operations. Adequate records and documents were maintained as required by laws. The Companys audit Committee reviewed the internal control system. All efforts are being made to make the internal control systems more effective.
CONSOLIDATED SEGMENT WISE REPORTING
During the year under review, Company has achieved all sales under Segment B i.e., Trading only.
Name of the segments dealed by the Company during the year 2021-22:
1. Segment A: Manufacturing (Under Process)
2. Segment B: Trading
RISKS AND CONCERNS
In any business, risks and prospects are inseparable. As a responsible management, the Companys principal endeavor is to maximize returns. The Company continues to take all steps necessary to minimize losses through detailed studies and interaction with experts.
Statement in this Managements Discussion and Analysis detailing the Companys objectives, projections, estimates, expectations or predictions are "forward-looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include global and Indian demand-supply conditions, feedstock availability and prices, cyclical demand and pricing in the Companys principal markets, changes in Government regulations, tax regimes, economic developments within India and the countries within which the Company conducts business and other factors such as litigation and labour negotiations.
DISCLOSURE OF ACCOUNTING TREATMENT
The Company has followed all the treatments in the Financial Statements as per the prescribed Accounting Standards.
|By Order of the Board of Directors|
|For AKG Exim Limited|
|RAHUL BAJAJ||MAHIMA GOEL|
|EXECUTIVE DIRECTOR & CFO||MANAGING DIRECTOR|
|Date: 3rd September, 2022|